Depth severance

A depth severance, sometimes called a horizontal severance or a depth limitation, splits the mineral estate by depth rather than by fraction or by acreage. Above the line is one ownership, below it is another, and a well only pays the owners of the interval it actually produces from.

How the split gets made

There are three ways the line usually gets drawn, and they behave very differently once a drilling rig shows up.

1. By measured depth

"All minerals below 7,500 feet." Simple to read and simple to litigate over, because measured depth is measured from somewhere, and the deed frequently does not say from where. Surface elevation? The kelly bushing of a rig that no longer exists? Sea level? On a horizontal well the difference between measured depth along the wellbore and true vertical depth can be thousands of feet.

2. By stratigraphic marker

"All minerals below the base of the Woodford Shale." Geologically honest, because rock does not care about round numbers, and formations dip. But it moves the dispute from arithmetic to interpretation: which log defines the base, and whose geologist reads it.

3. By named formation or by producing interval

"All rights in the Mississippian formation" or "all depths below the deepest producing interval." Common in old farmout and assignment language. The second version is the worst of them, because it defines a boundary using a fact that changes over time.

Why it matters more now than it did

Depth severances were mostly harmless in a vertical world. A vertical well passed through everything and the allocation was straightforward.

Horizontal drilling broke that. A modern lateral is placed in one target interval and stays there for two miles. If the lateral sits below your depth line, you may own minerals under the entire wellbore and receive nothing. If it sits above, the deep owner gets nothing. There is no splitting the difference, because the well produces from one interval.

The second thing that changed is stacked pay. Where several formations are productive at different depths, a single tract can support separate development at separate depths on separate schedules, and a depth severance turns into two entirely distinct assets with different timelines and different buyers.

How to find out which depths you own

1. Read the deed that created the severance, and read it for the exact boundary language rather than the summary. The whole answer is in that sentence.
2. Read your lease for a depth clause. A lease can be limited by depth even when the ownership is not, and a depth clause is one of the most valuable things a lessor can negotiate: it returns the deep or shallow rights to you if the operator never develops them. See the Pugh clause, which does the same job across acreage rather than depth.
3. Check the completion report on the wells near you. It states the producing interval and the perforated depths. State regulators publish these free, and our well records page lists where to find them in twenty states.
4. Compare the two. If the producing interval is on the other side of your line, that explains the check you are not receiving.

Depth severance and pooling

Pooling and unitization generally happen interval by interval, which is why a spacing order or a pooling application names a formation. In Oklahoma, drilling and spacing units are established for named common sources of supply, so a depth severed owner participates in the units covering the intervals they own and not the others. That can mean receiving a pooling election on one formation and nothing at all on the well drilled through the same acreage into a different one. See forced pooling in Oklahoma and the pooling election calculator.

What it does to value

Depth severed interests are consistently mispriced, in both directions, and the reason is mechanical. Data driven offers work from county records and production data, which do a poor job of representing depth limited ownership. So:

• A shallow only interest in a stacked play is often valued as though it owned the whole column. That sounds good until closing, when the buyer's title work finds the severance and the number falls.
• A deep only interest under a producing shallow well can be treated as producing when it is not, or as worthless when the deep rights are the valuable half.
• Undeveloped deep rights in an area starting to test a lower bench are the ones most likely to be bought cheaply from an owner who did not know they owned them separately.

If you are being offered a number and you know there is a depth severance in your chain, say so and ask how the offer treats it. The answer will tell you whether anyone read your title.

Related

• The Pugh clause, and the depth version of it
• The Duhig rule and overconveyance
• Fixed versus floating NPRI
• Forced pooling in Oklahoma
• Free well and completion records for twenty states
• The section, township and range map
• The mineral glossary

Berlin Royalties is a mineral buyer and a landman shop in Tulsa, not a law firm. Depth severance disputes turn on the exact wording of the instrument and on state law, and this page is a general description rather than advice about your title.